Partnership firms

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Dear Friends,

If a partnership firm is making loss in a 1st year of it.. whether there is any clause to pay a minimum tax.. is it so that if the firm doest show that minimum proft it shall be audited..??

For eg: If a AB & Co. in its 1st F.Y 2011-12 with the Nominal turnover of Rs. 1,50,000/- makes a loss of Rs. 20,000/- before distribution of interest & salary to partners then:

1. whether it is compulsory to get the firm audited..??

2. whether firm can distribute Salary & Interest to Partners..??

3. Whether there is any provision to show minimum Profits before & after remuneration & interest to partners..??

The above questions is NOT for LLP.. Plz assist with the suitable links if possible.

Replies (2)

the provision of section 44AB relating to tax audit is applicbale only if the turnover of the firm crosses the 1crore mark during the previous. Hence audit is N/a in your case. However as the firm has incurred an loss it is mandtory for the firm to submit it's return on or before the due date of filing the return, otheriwise the benefit of c/f of the loss cannot be availed.

as per section 40(b) (5) of the I-T act, remuneration can be paid to partners upto Rs.150000 in case of an loss.  the remaining remuneration paid would be disallowed.

there is no provision to show minimum or maximum profits after remuneration to the partners.

What about section 44AD..?? whether it will be applicable to firm..??

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